EX-99 3 rcnpr1111.htm EXHIBIT 99.1 8K Form


Exhibit 99.1


105 Carnegie Center
Princeton, NJ 08540

FOR IMMEDIATE RELEASE


CONTACT: Barak Bar-Cohen, RCN Public Relations, (212) 842-7705
  Jim Downing, RCN Investor and Public Relations, (609) 734-3718
  Ellen Gonda, Brunswick Group, (212) 333-3810


RCN ANNOUNCES THIRD QUARTER 2003 RESULTS


PRINCETON, NJ, November 11, 2003—RCN Corporation (Nasdaq: RCNC) today announced its results for the quarter ended September 30, 2003. Revenues for the quarter were $115.0 million, a 6.1% increase from $108.4 million a year ago. RCN announced a net loss to common shareholders of $110.5 million, or $1.00 loss per average common share, compared to a loss of $169.2 million, or $1.54 loss per average common share in the third quarter of 2002, including income from discontinued operations.

Additionally, RCN intends to file its 3rd Quarter 2003 Form 10-Q with the Securities and Exchange Commission on Wednesday, November 12, 2003. Please see the section below, Where You Can Find More Information, for details on obtaining a copy of the proposed filing.

RCN is a 50/50 partner in Starpower, a joint venture serving the Washington, D.C. metropolitan area. Starpower’s results are not included in RCN’s financial statements prepared in accordance with generally accepted accounting principles (“GAAP”). RCN management evaluates the financial and operational performance of the Company based on results that include Starpower. Including Starpower’s results, revenues for the quarter ended September 30, 2003 were $135.6 million, a 4.9% increase from $129.3 million in the third quarter of 2002. Including Starpower, consolidated adjusted EBITDA1 was $2.4 million, compared to a loss of $21.0 million in the third quarter of 2002.

Including Starpower, RCN finished the quarter with 1,390,402 marketable homes, with 436,020 customers on its network, of which 187,161, or 42.9%, were taking one of the ResiLinkSM bundles. ResiLink customers ended the quarter with an average of 3.3 services including long distance. Overall customer churn during the quarter was 2.8%.

Liquidity Update as of September 30, 2003

Cash burn for the quarter was $68.3 million, including $56.0 million for debt service expenses and fees. Capital expenditures totaled $28.5 million for the quarter, and $78.2 million year to date. Cash outlays for capital expenditures were down approximately 19% from the same quarter last year. The Company had $289.5 million of cash and short-term investments, which includes $142.6 million of short-term restricted investments, and $100 million of long-term restricted investments. The long-term restricted cash investment relates to the Company’s requirement to maintain at least $100


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RCN 3rd Quarter Results- continued



million in a cash collateral account for the benefit of its senior secured lenders. The Company had $1.67 billion of outstanding debt at the end of the quarter.

Debt Retirement

On August 18, 2003, RCN closed its cash tender offer to purchase its outstanding Senior Notes (the “Notes”) without distinguishing between the issues. The principal amount of Notes tendered was approximately $75.2 million. The company paid the aggregate purchase price including accrued interest through August 19, 2003, approximately $28.4 million, to the depositary for those Notes accepted for payment on August 20, 2003.

Financial Highlights and Key Ratios

Presented below is financial information reviewed by our senior management, chief operating decision makers, investors and industry analysts. Specifically, such financial information combines our GAAP financial results with the financial results of our Starpower joint venture as if it were a consolidated entity.

The following is a comparison of financial highlights and key ratios with and without the effect of Starpower. Financial measures in the “Without Starpower” column are based on directly comparable GAAP financial measures:

Metrics are for the Quarter Ended, or as of,
September 30, 2003 		As
Presented 		Without
Starpower(GAAP)
    Average residential revenue per customer 2 $  89.51  $  89.57 
    Percent increase in average residential revenues per 12.7% 13.1%
    customer, over the quarter ended September 30, 2002
    Average Services per Customer for the quarter ended 2.32  2.33 
    September 30, 2003
    Percent increase in average services per customer, 8.0% 8.2%
    year over year
    Number of residential customers 436,020  387,352 
    Marketable homes 1,390,402  1,214,322 
    Percentage of customers at September 30, 2003 who 42.9% 43.5%
    subscribe to an RCN bundle
    Core residential revenue as a percent of total revenue 88.7% 92.5%
    Adjusted EBITDA1 for quarter ended September 30, 2003 $  2.4m  ($0.7 m) 
    Adjusted EBITDA1 for quarter ended September 30, 2002 ($21.0 m)  ($22.5 m) 
  For a detailed presentation of financial measures calculated and presented in accordance with GAAP, see the Company’s quarterly report on Form 10-Q.



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1 Adjusted EBITDA — Non GAAP measure calculated as net income (loss) before interest, tax, depreciation and amortization, stock based compensation, extraordinary gains and special charges, that the Company and its chief decision-makers use to measure performance and liquidity. Other companies may calculate and define EBITDA differently than RCN.

2 Average Revenue per Customer – Due to a multiple billing systems platform, the number of Residential Customers is actual where the Convergent Billing System was implemented, and based on an algorithm in non-converted markets. The final markets, Chicago and New York, were converted in the fourth quarter of 2002.

About RCN Corporation

RCN Corporation (Nasdaq: RCNC) is the nation’s first and largest facilities-based competitive provider of bundled phone, cable and high speed Internet services delivered over its own fiber-optic local network to consumers in the most densely populated markets in the U.S. RCN has more than one million customer connections and provides service in the Boston, New York, Philadelphia/Lehigh Valley, Chicago, San Francisco, Los Angeles and Washington, D.C. metropolitan markets.

Where You Can Find More Information

We, as a reporting company, are subject to the informational requirements of the Exchange Act and accordingly file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC. You may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information on the Public Reference Room. As an electronic filer, our public filings are maintained on the SEC’s Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is http://www.sec.gov. In addition, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act may be accessed free of charge through our website as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the SEC.

RCN intends to file its 3rd Quarter Form 10-Q on Wednesday, November 12, 2003. Until Wednesday, investors wishing to access the preliminary Form 10-Q can do so at RCN’s website. The address of that website is http://www.rcn.com/investor/secfilings.php.

Since September 30, 2003, all reports pursuant to the Exchange Act that we have filed with, or furnished to, the SEC have been timely posted on our website.



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RCN 3rd Quarter Results- continued



Forward-Looking Statement

Some of the statements made by RCN in these statements are forward-looking in nature. Actual results may differ materially from those projected in forward-looking statements as a result of a number of factors. RCN believes that the primary factors include, but are not limited to, availability of financing, ability to obtain regulatory approvals, uncertainty relating to economic conditions, ability to attract and retain qualified management and other personnel, changes in government and regulatory policies, pricing and availability of equipment, materials, inventory and programming, our ability to meet the requirements in our franchise agreements, the number of potential customers in a target market, the completion of acquisitions or divestitures, acceptance of the Company’s services, development and implementation of business support systems for provisioning and billing, the availability and success of strategic alliances or relationships, ability to overcome significant operating losses, RCN’s ability to develop and penetrate existing and new markets, technological developments and changes in the industry, changes in the competitive environment in which RCN operates and ability to produce sufficient cash flow. Additional information concerning these and other important factors can be found in RCN’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors.

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RCN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)


Three Months Ended
September 30, 2003		 Three Months Ended
September 30, 2002
Sales: RCN    
    Including
Starpower(1)   		 Less   
Starpower(2)   		 RCN
GAAP
 RCN    
     Including
Starpower(1)   		 Less   
Starpower(2)   		 RCN
GAAP
Voice $     39,891  $   3,627  $     36,264  $    38,343  $   3,908  $   34,435 
Video 56,907  6,784  50,123  51,151  6,033  45,118 
Data 32,463  9,154  23,309  31,411  9,649  21,762 
Other 6,370  1,075  5,295  8,395  1,330  7,065 
Total sales 135,631  20,640  114,991  129,300  20,920  108,380 
Costs & expenses, excluding
   non-cash stock based
   compensation, depreciation
   and amortization,
   and special charges
Direct expenses 46,375  5,295  41,080  46,906  5,329  41,577 
Operating and SG&A 86,810  12,202  74,608  103,377  14,076  89,301 
Adjusted EBITDA (3) from continuing
   operations before non-cash stock
   based compensation, asset
    impairment and special charges 2,446  3,143  (697) (20,983) 1,515  (22,498)
Non-cash stock based compensation 3,180  57  3,123  10,902  --  10,902 
Impairment and special charges 25,371  --  25,371  (20) --  (20)
Depreciation and amortization 57,746  5,057  52,689  59,726  4,872  54,854 
Operating loss (83,851) (1,971) (81,880) (91,591) (3,357) (88,234)
Investment income 1,742  18  1,724  2,614  21  2,593 
Interest expense 43,496  --  43,496  47,099  --  47,099 
Gain on early extinguishment of debt 45,733  --  45,733  --  --  -- 
Other income (expense), net 644  --  644  1,101  --  1,101 
Loss from continuing operations
  before income taxes (79,228) (1,953) (77,275) (134,975) (3,336) (131,639)
Income tax provision (benefit) (12) --  (12) --  --  -- 
Loss from continuing operations
  before equity in unconsolidated
  entities and minority interest (79,216) (1,953) (77,263) (134,975) (3,336) (131,639)
Equity in income of
  unconsolidated entities 8,277  547  7,730  1,620  1,668  (48)
Minority interest in loss of
  consolidated entities 547  547  --  1,668  1,668  -- 
Net loss from continuing operations (70,392) (859) (69,533) (131,687) --  (131,687)
Income from discontinued
  operations, net of tax 2,704  --  2,704  3,404  --  3,404 
Net loss (67,688) (859) (66,829) (128,283) --  (128,283)
Preferred dividend and
  accretion requirements 43,705  --  43,705  40,871  --  40,871 
Net loss to common shareholders $ (111,393) $    (859) $  (110,534) $  (169,154) $       --  $(169,154)
Basic and diluted loss
per common share:
   Net loss from continuing operations $       (1.02)   $        (1.02) $       (1.57)   $      (1.57)
   Net income from
     discontinued operations 0.02    0.02  0.03    0.03 
 
 
 
   Net loss to common shareholders $       (1.00)   $        (1.00) $      (1.54)   $      (1.54)
 
 
 
Weighted average shares
  outstanding, basic and diluted 111,401,962    111,401,962  109,798,588   109,798,588 
 
 
 


(1) Excludes results of Carmel, NY operations which is included as a discontinued operation for GAAP purposes.

(2) RCN owns 50% of Starpower, a joint venture in the Washington, D.C. market which is accounted for as an equity investment in our condensed consolidated financial statements. Results of operations of Starpower have been presented here net of related party transactions with RCN.

(3) Adjusted EBITDA - Non GAAP measure calculated as net loss before interest, tax, depreciation and amortization, stock based compensation, extraordinary gains and special charges that the Company and its chief decision-makers use to measure performance and liquidity. Other companies may calculate and define EBITDA differently than RCN




RCN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)


Nine Months Ended
September 30, 2003		 Nine Months Ended
September 30, 2002
Sales: RCN    
    Including
Starpower(1)   		 Less   
Starpower(2)   		 RCN 
GAAP
 RCN    
     Including
Starpower(1)   		 Less   
Starpower(2)   		 RCN 
GAAP
Voice $ 120,861  $ 11,321  $ 109,540  $ 110,276  $ 11,172  $  99,104 
Video 170,182  20,798  149,384  149,971  17,566  132,405 
Data 95,318  26,685  68,633  94,300  29,246  65,054 
Other 24,011  4,521  19,490  30,572  4,413  26,159 
Total sales 410,372  63,325  347,047  385,119  62,397  322,722 
Costs & expenses, excluding
  non-cash stock based
  compensation, depreciation and
  amortization, and special charges
Direct expenses 140,066  16,775  123,291  146,370  15,556  130,814 
Operating and SG&A 262,305  36,785  225,520  312,403  37,013  275,390 
Adjusted EBITDA (3) from
  continuing operations before
  non-cash stock based
  compensation, asset impairment
  and special charges 8,001  9,765  (1,764) (73,654) 9,828  (83,482)
Non-cash stock
   based compensation 8,045  75  7,970  25,304  --  25,304 
Impairment and special charges 31,948  --  31,948  889,745  --  889,745 
Depreciation and amortization 163,416  15,059  148,357  228,942  16,812  212,130 
 
Operating loss (195,408) (5,369) (190,039) (1,217,645) (6,984) (1,210,661)
Investment income 5,470  52  5,418  11,823  84  11,739 
Interest espense 138,403  2  138,401  126,718  --  126,718 
Gain on early
  exstinguishment of debt 45,733  --  45,733  13,073  --  13,073 
Other income (expense), net 9,007  (75) 9,082  (70,643) (70,688) 45 
Loss from continuing operations
  before income taxes (273,601) (5,394) (268,207) (1,390,110) (77,588) (1,312,522)
Income tax provision (benefit) --  --  --  (880) --  (880)
Loss from continuing operations
  before equity in
  unconsolidated entities
  and minority interest (273,601) (5,394) (268,207) (1,389,230) (77,588) (1,311,642)
Equity in income of
  unconsolidated entities 21,114  2,697  18,417  14,830  38,794  (23,964)
Minority interest in loss
  of consolidated entities 2,697  2,697  --  75,444  38,794  36,650 
Net loss from continuing
  operations (249,790) --  (249,790) (1,298,956) --   (1,298,956)
Income from discontinued
  operations, net of tax 174,125  --  174,125  7,319  --   7,319 
Net loss (75,665) --  (75,665) (1,291,637) --   (1,291,637)
Preferred dividend and
 and accretion requirements 128,946  --  128,946  120,589  --   120,589 
Net loss to common shareholders $   (204,611) $        --  $(204,611) $ (1,412,226) $      --   $(1,412,226)
Basic and diluted loss
per common share:
   Net loss from
     continuing operations $         (3.42)    $      (3.42) $       (13.47)    $         (13.47)
   Net income from
     discontinued operations 1.57     1.57  0.07     0.07 
 
 
 
   Net loss to
     common shareholders $         (1.85)    $      (1.85) $       (13.40)    $         (13.40)
 
 
 
Weighted average shares
   outstanding, basic
   and diluted 110,712,231     110,712,231  105,354,946     105,354,946 
 
 
 


(1) Excludes results of Carmel, NY operations which is included as a discontinued operation for GAAP purposes.

(2) RCN owns 50% of Starpower, a joint venture in the Washington, D.C. market which is accounted for as an equity investment in our condensed consolidated financial statements. Results of operations of Starpower have been presented here net of related party transactions with RCN.

(3) Adjusted EBITDA - Non GAAP measure calculated as net loss before interest, tax, depreciation and amortization, stock based compensation, extraordinary gains and special charges that the Company and its chief decision-makers use to measure performance and liquidity. Other companies may calculate and define EBITDA differently than RCN



RCN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)


September 30, December 31,
2003
 2002
ASSETS        
Current assets: 
  Cash and temporary cash investments  $     46,939   $     49,365  
  Short-term investments  --   227,641  
  Accounts receivable from related parties  13,269   10,068  
  Accounts receivable, net of reserve for 
    doubtful accounts of $6,577 and $10,653  50,534   55,120  
  Unbilled revenues  473   770  
  Interest and dividends receivable  1,274   1,595  
  Prepayments and other current assets  31,218   17,757  
  Short-term restricted investments  142,565   34,920  
  Current assets of discontinued operations  3,524   5,985  
Total current assets  289,796   403,221  
Property, plant and equipment, net of accumulated 
  depreciation of $916,121 and $777,580  1,097,490   1,213,383  
Investments in joint ventures and equity securities  241,874   228,231  
Intangible assets, net of accumulated 
  amortization of $18,217 and $64,912  1,551   1,741  
Goodwill, net  6,130   6,130  
Long-term restricted investments  100,000   --  
Deferred charges and other assets  40,862   43,595  
Noncurrent assets of discontinued operations  26,315   93,980  
Total assets  $1,804,018   $1,990,281  



September 30, December 31,
2003
 2002
LIABILITIES AND SHAREHOLDERS' DEFICIT      
Current liabilities: 
  Current maturities of long-term debt  $      44,229   $      37,417  
    Accounts payable  22,531   27,273  
  Accounts payable to related parties  7,670   13,833  
  Advance billings and customer deposits  26,983   26,770  
  Accrued exit costs  38,575   30,667  
  Accrued expenses  142,500   174,632  
  Current liabilities of discontinued operations  3,826   7,723  
Total current liabilities  286,323   318,315  
Long-term debt  1,623,758   1,706,997  
Other deferred credits  4,927   4,166  
Minority interest  --   791  
Redeemable preferred stock  2,433,373   2,304,426  
Common shareholders' deficit  (2,544,363 ) (2,344,414 )
Total liabilities and shareholders' deficit  $ 1,804,018   $ 1,990,281  



CONNECTIONS (1) RCN Corporation - Quarterly Connections    
 
2Q02
 3Q02
 4Q02
 1Q03
 2Q03
 3Q03
RCN including Starpower
 		            
    Voice 243,006  252,008  252,141  256,205  262,202  269,701 
    Video 394,185  396,800  397,320  396,801  400,834  407,955 
    Data 131,201  141,941  152,331  165,197  174,588  187,431 
          
    Subtotal Network Connections: 768,392  790,749  801,792  818,203  837,624  865,087 
 
    Resale 19,454  16,949  16,169  14,498  12,922  11,392 
    Dial-up 311,669  296,759  281,141  267,219  208,230  208,406 
 
         
    Total Service Connections: 1,099,515  1,104,457  1,099,102  1,099,920  1,058,776  1,084,885 
 
         
 
    Long Distance --  126,811  178,232  176,220  175,366  177,390 
    Marketable Homes 1,362,383  1,365,131  1,368,365  1,384,654  1,382,829  1,390,402 
 
Starpower
 		            
    Voice 21,365  24,191  24,590  25,435  26,551  28,197 
    Video 35,296  37,380  39,120  39,159  39,477  40,600 
    Data 13,450  15,233  16,874  18,316  19,457  21,455 
 
         
    Subtotal Network Connections: 70,111  76,804  80,584  82,910  85,485  90,252 
 
    Resale 8,550  7,253  6,465  5,678  4,961  4,302 
    Dial-up 147,008  140,835  133,757  127,375  102,869  107,340 
 
         
    Total Service Connections: 225,669  224,892  220,806  215,963  193,315  201,894 
 
         
 
    Long Distance --  25,013  23,870  22,110  20,968  21,118 
    Marketable Home 172,422  173,873  175,072  175,588  175,884  176,080 
 
RCN without Starpower
 		            
    Voice 221,641  227,817  227,551  230,770  235,651  241,504 
    Video 358,889  359,420  358,200  357,642  361,357  367,355 
    Data 117,751  126,708  135,457  146,881  155,131  165,976 
          
    Subtotal Network Connections: 698,281  713,945  721,208  735,293  752,139  774,835 
 
    Resale 10,904  9,696  9,704  8,820  7,961  7,090 
    Dial-up 164,661  155,924  147,384  139,844  105,361  101,066 
 
         
    Total Service Connections: 873,846  879,565  878,296  883,957  865,461  882,991 
          
 
    Long Distance --  101,798  154,362  154,110  154,398  156,272 
    Marketable Homes 1,189,961  1,191,258  1,193,293  1,209,066  1,206,945  1,214,322 

(1)  excludes results of discontinued operations